XD Inc. 2020 Annual Report

Key insights

6 takeaways

01
XD Inc. prioritized long-term growth over short-term profitability in 2020, resulting in an 89.1% decline in net profit to RMB 55.8 million.See it on page 152
02
The company aggressively scaled R&D investment by 107% to support its strategic pivot toward cross-platform and live-service gaming.See it on page 10
03
The TapTap distribution platform saw significant user growth, with monthly active users increasing by 43.7% in the PRC and 330.9% in overseas markets.See it on page 14
04
Despite a sharp drop in net profit, the company maintained a strong liquidity position with RMB 2.32 billion in cash and cash equivalents, supported by equity financing.See it on page 18
05
Total revenue for 2020 remained stable at approximately RMB 2.85 billion, reflecting the transition period between the company's game publishing and information services segments.See it on page 16
06
The company utilizes contractual arrangements to manage foreign investment restrictions in the PRC, acknowledging inherent regulatory risks while focusing on internal controls and ESG initiatives.See it on page 64

Summary

The 2020 Annual Report for XD Inc. outlines a strategic pivot toward long-term value creation, characterized by aggressive investment in research and development and the expansion of the TapTap distribution platform. The company’s primary thesis centers on the synergy between its in-house game development and its zero-revenue-share distribution model, which aims to foster a high-performance ecosystem that attracts both developers and players. By prioritizing talent density and organizational decentralization, the company seeks to secure a competitive advantage in the global cross-platform and live-service gaming markets.

Financial performance in 2020 reflected this transition, as the company prioritized growth over short-term profitability. While total revenue remained stable at approximately RMB 2.85 billion, net profit declined by 89.1% to RMB 55.8 million, primarily due to a 107% increase in R&D expenditures and higher tax expenses. Despite this contraction in margins, the company maintained a robust financial position with RMB 2.32 billion in cash and cash equivalents, bolstered by successful equity financing. The TapTap platform demonstrated significant momentum, with monthly active users for the PRC version growing by 43.7% and the overseas version surging by 330.9%.

The company operates across two primary segments: game publishing and information services. Governance remains a core focus, with the board maintaining oversight through specialized committees and a commitment to rigorous internal controls, risk management, and ESG initiatives. To navigate foreign investment restrictions in the PRC, the company utilizes contractual arrangements to maintain control over its domestic entities. While these structures carry inherent regulatory risks, the company continues to emphasize transparency, player protection, and sustainable operational practices as it scales its global footprint.